Stemcor USA, Inc. v. United States , 26 Ct. Int'l Trade 1373 ( 2002 )

Slip Op. 02-149
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: HON. RICHARD W. GOLDBERG, SENIOR JUDGE
STEMCOR USA, INC.,
Plaintiff,
v. Court No. 00-01-00048
UNITED STATES,
Defendant.
[Defendant’s Motion for Summary Judgment is denied in part and
granted in part.]
Dated: December 17, 2002
Follick & Bessich (Glenn H. Ripa, John A. Bessich, and Don M.
Obert) for plaintiff Stemcor USA, Inc.
Robert D. McCalllum, Jr., Assistant Attorney General; John J.
Mahon, Acting Attorney in Charge; Aimee Lee, Trial Attorney,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice; Beth C. Brotman, Office of Assistant Chief Counsel,
International Trade Litigation, United States Customs Service, of
Counsel, for defendant United States.
OPINION
GOLDBERG, Senior Judge: This case involves the proper
marking of steel bars imported from Turkey. Defendant moves for
summary judgment against plaintiff Stemcor USA, Inc. (“Stemcor”),
pursuant to U.S.C.I.T. Rule 56. Stemcor asserts that it is
entitled to a marking exception because re-marking the steel bars
Court No. 00-01-00048 Page 2
is prohibitively expensive, and that the United States Customs
Service (“Customs”) impermissibly exceeded its discretion when it
issued a Notice of Extension for liquidation of the subject
entry.
Background
This case involves entry number 110-09-0982052-1, which was
filed at the Port of San Juan, Puerto Rico on July 18, 1996. The
merchandise was released to Stemcor on that same day. It is
unclear from the papers submitted to the Court the procedure
under which the goods were released to Stemcor. There is no
evidence of whether Stemcor requested immediate entry of the
goods without inspection, or whether the goods were conditionally
released to Stemcor. The merchandise consisted of 16,957 bundles
of deformed concrete reinforcing steel bars made in Turkey and
imported by Stemcor. The bars were individually marked with the
letters “TR” at one end and were transported in bundles held
together with steel straps. Tags reading “Made in Turkey” were
attached at both ends of each bundle.
At the repeated prodding of a Stemcor competitor, Customs
visited a Stemcor customer on or before August 13, 1996, to
examine a portion of the subject merchandise.1 Customs
1
At oral argument before the Court on September 25, 2002,
Customs first informed the Court and Plaintiff that Customs’
decision to examine the subject merchandise was due to repeated
allegations by a Stemcor competitor that the merchandise was
improperly marked. Customs’ reason for examining the merchandise
Court No. 00-01-00048 Page 3
determined that the individual bars were not properly marked with
the name of their country of origin.2 On August 13, 1996,
Customs issued Customs Form 4647, Notice of Marking, indicating
that Stemcor should re-mark the merchandise in conformity with 19
U.S.C. § 1304(a), which requires that merchandise be marked, as
legibly, indelibly, and permanently as the nature of the article
will permit, to indicate to an ultimate purchaser in the United
States the English name of the country of origin. Customs also
indicated that its supervision of the re-marking was not
required. The Notice directed that upon completion of the re-
marking, Stemcor should complete a certification form and return
it to Customs. Stemcor responded in writing to the Notice of
Marking on August 22, 1996, indicating its belief that marking
the individual bars with the country of origin was unnecessary
under applicable statutes and regulations. It is apparent
through several letters to Stemcor’s customers dated August 22,
1996, that Stemcor had already released many of the bundles into
the U.S. market by August 13, 1996; however, it is unclear from
the papers before the Court the exact number of bundles of bars
is likely not a material fact in this case, but Customs’ behavior
is very troubling to the Court. Through Customs’ actions, 26
days had passed after entry and release of the subject
merchandise before Customs issued the Notice of Marking.
2
Stemcor now concedes that the marking “TR” does not
properly indicate the country of origin under 19 U.S.C. §
1304(a).
Court No. 00-01-00048 Page 4
that had been sold and entered the U.S. market by the date of the
Notice of Marking.
On June 14, 1997, Customs issued a Notice of Extension to
Stemcor, which allowed Customs additional time to liquidate the
entry before it would have been liquidated by operation of law on
its one-year anniversary date, July 18, 1997. Customs liquidated
the subject entry on July 28, 1997, and assessed ten percent
marking duties as a result of Stemcor’s failure to re-mark the
merchandise.
Stemcor filed a timely protest and application for further
review on October 14, 1997, claiming that the subject merchandise
was properly marked within the meaning, spirit, and intent of §
304 of the Tariff Act of 1930. Stemcor also claimed it was
exempted from the marking requirement under 19 C.F.R. § 134.32(o)
because re-marking was prohibitively expensive, and that the
entry liquidated by operation of law as entered on its one-year
anniversary date under 19 U.S.C. § 1504.3In response, Customs issued Headquarters Ruling Letter
561008 on August 4, 1999. Customs reliquidated the entry with
respect to 2,117 of the bundles without the assessment of ten
3
An entry liquidated by operation of law on its one-year
anniversary date is liquidated at the rate of duty, value,
quantity, and amount of duties assessed at the time of entry by
the importer of record. 19 U.S.C. § 1504(a) (2000).
Court No. 00-01-00048 Page 5
percent marking duties.4 However, the remaining 14,840 bundles
in the entry were denied relief, and are the subject of this
action.
Standard of Review
Congress has directed the Court of International Trade to
presume that Customs’s decisions are correct. 28 U.S.C. §
2639(a)(1) (2000); see also St. Paul Fire & Marine Insurance Co.
v. United States, 12 Fed. Cir. (T) 1, 7, 6 F.3d 763, 768 (1993);
Brother International Corp. v. United States, 26 CIT __, Slip Op.
02-80 at 5 (July 31, 2002). The statutory presumption of
correctness is “a procedural device that is designed to allocate,
between the two litigants in a lawsuit, the burden of producing
evidence in sufficient quantity.” Brother International Corp.,
Slip Op. 02-80 at 5 (quoting Universal Elecs. Inc. v. United
States, 112 F.3d 488, 492 (Fed. Cir. 1997)). To overcome this
presumption, a plaintiff must show by a preponderance of the
evidence that Customs’ decision was unreasonable. St. Paul Fire
& Marine, 12 Fed. Cir. (T) at 7, 6 F.3d at 768.
If a plaintiff is unable to produce sufficient evidence to
meet this burden, summary judgment may be appropriate. Under
Rule 56 of the Rules of the Court of International Trade, summary
judgment is proper “if the pleadings, depositions, answers to
4
These bundles were reliquidated because Stemcor could
show that they were delivered to end consumers still bundled, and
consequently with the “Made in Turkey” tag.
Court No. 00-01-00048 Page 6
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). A dispute is genuine “if the evidence is such that [the
trier of fact] could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Summary judgment should be granted if a party “fails to make a
showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear
the burden of proof at trial.” Celotex Corp., 477 U.S. at 322.
Discussion
The government filed for summary judgment on both of
Stemcor’s claims. Stemcor first claimed it is entitled to a
marking exception under 19 C.F.R. § 134.32(o) (2002) because the
cost of re-marking the merchandise after importation would have
been economically prohibitive. Stemcor also claimed that Customs
abused its discretion when it issued a Notice of Extension for
liquidation of the subject entry. Each of these arguments is
addressed in turn.
Court No. 00-01-00048 Page 7
A. There exist genuine issues of material fact that
Customs’ denial of Stemcor’s request for a marking
exception under 19 C.F.R. § 134.32(o) was
unreasonable.
Merchandise entering the commerce of the United States must
be marked, as legibly, indelibly, and permanently as the nature
of the article will permit, to indicate to an ultimate purchaser
in the United States the English name of the country of origin.
See 19 U.S.C. § 1304(a) (2000). When merchandise is not marked
properly, § 1304(i) mandates the assessment of a ten percent
marking duty if the improperly marked merchandise is not
exported, destroyed, or re-marked under the supervision of
Customs prior to liquidation of the entry. 19 U.S.C. § 1304(i)
(2000); see also Frontier Insurance Co. v. United States, 26 CIT
__, __, 185 F. Supp. 2d 1375, 1379 (2002). Merchandise may be
exempted from the marking requirement if it “cannot be marked
after importation except at an expense that would be economically
prohibitive.” 19 U.S.C. § 134.32(o).
Customs sent Stemcor a Notice of Marking, indicating that
Stemcor must re-mark the bars and submit a certificate of re-
marking to Customs. Under § 1304, Stemcor then had the option to
re-mark the bars as required, or export or destroy them.
However, by the date of the Notice of Marking Stemcor had already
released many of the bundles of bars into the U.S. market.
Stemcor released the remaining merchandise into commerce without
submitting a certificate of re-marking. This is in contradiction
Court No. 00-01-00048 Page 8
to Customs’ instructions, which read, “WARNING: all merchandise
must be retained until you are notified by Customs that
corrective action is acceptable.” See Complaint, Exhibit C,
Notice of Marking.
In its complaint, Stemcor claims that it is entitled to a
marking exception under 19 C.F.R. § 134.32(o), on the grounds
that re-marking the bars is economically prohibitive. Customs
argues in its summary judgment motion that because Stemcor had
already released the merchandise into the U.S. market, Stemcor is
precluded from claiming a re-marking exception under § 134.32(o).
According to Customs, because 19 U.S.C. § 1304(i) mandates that
re-marking is to take place “prior to the liquidation of the
entry covering the article,” it follows that any exception to
this requirement must be sought prior to liquidation of the entry
and prior to the release of the goods into the U.S. market.
Stemcor sought the exception at the protest stage, after
liquidation and after it released the bars into commerce, making
any re-marking of individual bars or bundles an impossibility.
Therefore, under Customs’ analysis, Stemcor is precluded from
claiming a re-marking exception under § 1304(i).
The Court does not agree with Customs. There is no time
limit for Stemcor to claim the re-marking exception under the
language of 19 C.F.R. § 134.32(o), nor any requirement this
exception must be claimed prior to liquidation of the entry.
Court No. 00-01-00048 Page 9
Significantly, there is no requirement in the regulations that a
claim for the re-marking exception must be made before the
merchandise is released into the U.S. market. Therefore, Stemcor
can assert a claim for a re-marking exception under 19 C.F.R. §
134.32(o).
Having timely applied for the exception, Stemcor must
demonstrate there are genuine issues of material fact as to
whether re-marking the bars is economically prohibitive. An
importer is entitled to a marking exception if the importer can
show (1) that the cost of marking the subject merchandise after
importation would be economically prohibitive; and (2) that the
importer, producer, seller, or shipper did not fail to mark the
articles before importation in order to avoid meeting the
requirements of law. Customs does not dispute that Stemcor’s
failure to mark the items before importation was not an attempt
to avoid the law.
As to the first element of the marking exception, there are
genuine issues of material fact whether the proof submitted by
Stemcor is sufficient. Stemcor suggested one option for re-
marking—attaching individual sticker labels to each bar—and set
forth cost figures allegedly associated with that method of re-
marking. There were no estimates or invoices to support
Stemcor’s re-marking cost figures; nor did Stemcor provide cost
figures for any alternatives to attaching sticker labels to the
Court No. 00-01-00048 Page 10
bars. However, the president of Stemcor claims in his affidavit
that “Stemcor has made bona fide inquiries with respect to the
expenses involved in the re-marking.” Affidavit of Peter Blohm.
Another issue of material fact is whether Customs’
reasonably considered Stemcor’s request for the re-marking
exception. In denying the re-marking exception, Customs only
briefly discussed the exception and never commented on the
evidence submitted by Stemcor:
The other exception that counsel raised in this case is
19 CFR 134.32(o), which excepts from marking articles
which cannot be marked after importation except at an
expense that would be economically prohibitive. This
exception is not available if the failure to mark was
to avoid meeting the requirements of the law.
The language of 19 U.S.C. 1304(f) clearly states that
if the conditions for payment of marking duties exist,
the marking duties “shall not be avoidable for any
cause.” Since in this case, the goods were not
properly marked when entered and the goods were not
exported, destroyed, or re-marked under Customs
supervision, we find that pursuant to 19 U.S.C. 1304(f)
(1996), the exception set forth at 19 CFR 134.32(o) is
inapplicable.
Headquarters Letter 561008, August 4, 1999, at 11. Such an
interpretation of the regulations by Customs essentially
eliminates the exception in 19 C.F.R. § 134.32(o) from the
regulations. Based on the foregoing discussion, genuine issues
of material fact exist as to whether Customs’ denial of Stemcor’s
claim for a re-marking exception was unreasonable.
Court No. 00-01-00048 Page 11
B. Customs acted reasonably in issuing a Notice of
Extension for liquidation of the subject entry.
Customs has considerable discretion in administering Customs
law. Under 19 U.S.C. § 3, “[t]he Secretary of the Treasury shall
direct the superintendence of the collection of the duties on
imports as he shall judge best.” See also National Corn Growers
Ass’n v. Baker, 6 Fed. Cir. (T) 70, 75-76, 840 F.2d 1547, 1554-55
(1988). Customs may extend the entry liquidation period for up
to four years if it requires information “for the proper
appraisement or classification of the merchandise, or for
insuring compliance with applicable law, [that] is not available
to the Customs service.” 19 U.S.C. § 1504(b)(1) (2000).
Information that Customs needs is construed to include “whatever
is reasonably necessary” for proper appraisement or
classification, and includes information sought from within the
agency. Detroit Zoological Soc’y v. United States, 10 CIT 133,
138, 630 F. Supp. 1350, 1356 (1986).
There exists a narrow limitation on Customs’ discretion to
extend the period of liquidation, which arises “only when an
extension is granted . . . following elimination of all possible
grounds for such an extension.” St. Paul Fire & Marine, 12 Fed.
Cir. (T) at 7, 6 F.3d at 768 (emphasis added). Upon review,
Customs’ decision to extend a period of liquidation is entitled
to a presumption of correctness, unless the importer can prove by
a preponderance of the evidence that the decision was
Court No. 00-01-00048 Page 12
unreasonable. 28 U.S.C. 2639(a)(1) (2000); see also St. Paul
Fire & Marine, 12 Fed. Cir. (T) at 7, 6 F.3d at 768.
Accordingly, in this case Stemcor bears the burden of proof, and
must eliminate all possible grounds for the extension in order to
demonstrate that Customs abused its discretion. Id.Stemcor argues that the information Customs sought was
available when the extension was issued, and that Customs was lax
in not requesting additional information of Stemcor. However, 19
U.S.C. § 1504(b) does not specify that the information must come
from the plaintiff. Thus, Customs may justify an extension of
liquidation even “if additional time is needed to obtain [ ]
internal advice and to consider it before making the
classification decision.” Detroit Zoological Soc’y, 630 F.Supp.
at 1356-57 (emphasis added).
Here, the evidence indicates that Customs was considering
the marking issue internally during the extension period. First,
Customs was internally evaluating Stemcor’s position that the
goods were properly marked and that Stemcor’s customers were
aware that Turkey was the country of origin. Second, Customs was
assessing the amount of marking duties, which is an appraisal
issue for which Customs may extend the liquidation period. See
19 U.S.C. § 1504(b)(1). Finally, Customs was ensuring Stemcor’s
compliance with applicable law, another basis upon which Customs
may extend the liquidation period. Id. That Customs sought this
Court No. 00-01-00048 Page 13
information internally, rather than from Stemcor, does not
constitute an unreasonable basis for issuing an extension. See
Detroit Zoological Soc’y, 630 F.Supp. at 1356-57.
Stemcor also contends that Customs did not need extra time
to get the aforementioned internal information, and that the
extension was the result of Customs’ laxity. Stemcor cites the
fact that Customs had approximately 11 months to gather the
information it required, yet did not pursue the information until
almost 10 months after issuing the Notice of Marking.
Specifically, Stemcor premises its argument on its disbelief that
Customs officials were unable to discuss earlier whether the
letters “TR” were a sufficient country of origin marking.
Stemcor’s claim of Customs’ laxity must fail for two
reasons. First, there is no legal claim for laxity. Rather,
Stemcor must show by a preponderance of the evidence that Customs
acted unreasonably; otherwise, the correctness of Customs’
decision to extend the liquidation period is presumed. See St.
Paul Fire & Marine, 12 Fed. Cir. (T) at 7, 6 F.3d at 768. Thus,
Stemcor must not only show that Customs was lax, but must show by
a preponderance of the evidence that it was unreasonably so.
Stemcor also lacks sufficient proof that Customs acted
unreasonably. Stemcor has not presented any evidence to support
its assertions that when the import specialist realized the one-
year liquidation deadline was arriving she rushed to gain
Court No. 00-01-00048 Page 14
additional time, or that the delay was caused by Customs’ laxity.
Moreover, Customs’ letter to the record, dated July 8, 1997,
indicates that Customs officials were actively considering the
marking issue. See Defendant’s Motion for Summary Judgment,
Exhibit C. That this document does not reference any other
conversations or ongoing discussions does not prove that Customs
was not considering the matter prior to issuing the Notice of
Extension. Thus, Stemcor has failed to meet its burden of
showing that Customs had no reasonable basis for issuing the
extension.
Finally, Stemcor argues that the letters “TR” so obviously
do not constitute sufficient country of origin marking under the
language of 19 U.S.C. § 1304, that Customs did not need any
additional time. Stemcor cites Densten Felt & Hair Co. v. United
States, 1 Cust. Ct. 416 (1938), in which the initials “U.S.S.R.”
were insufficient to indicate country of origin of the subject
merchandise, in support of its argument. However, since “TR” is
not an acceptable marking for Turkey, Customs arguably needed the
time to ensure Stemcor’s compliance with applicable laws.
Stemcor provides the Court with no evidence to refute this
reasonable basis for the extension.
For the foregoing reasons, Stemcor has failed to eliminate
all possible grounds for Customs’ extension of the liquidation
period, and is thus unable to overcome the presumption of
Court No. 00-01-00048 Page 15
correctness afforded to Customs’ decisions. Customs therefore
properly exercised its discretion to issue the Notice of
Extension.
Conclusion
Stemcor has created genuine issues of material fact as to
whether Customs’ denial of Stemcor’s request for a marking
exception under 19 C.F.R. § 134.32(o) was unreasonable.
Therefore, Customs’ motion for summary judgment on that issue is
denied. Stemcor has not created a genuine issue of material fact
that Customs’ decision to issue the extension was unreasonable.
Therefore, Customs’ motion for summary judgment on the issue of
the extension of the liquidation period is granted.
Richard W. Goldberg, Senior Judge
Date: December 17, 2002
New York, New York.
ERRATA
Stemcor USA, Inc. v. United States, Court No. 00-01-00048, Slip
Op. 02-149, issued December 17, 2002.
! On page 15, after the sentence which reads “Therefore,
Customs’ motion for summary judgment on the issue of the
extension of the liquidation period is granted”
insert the following sentence
“The parties are to confer and contact chambers within
thirty days to report on timing for a trial in this matter.”